Wall St muted as investors focus on earnings, Fed cues

WASHINGTON DC: Wall Street's main indexes were little changed on Monday as investors awaited more bank earnings and views from Federal Reserve policymakers that could provide cues on when the central bank will pause its monetary tightening.

Wall Street closed lower on Friday after mixed economic data appeared to affirm another Fed rate hike in May, dampening investor enthusiasm after a series of big U.S. bank earnings launched the first-quarter reporting season. While banking heavyweights including JP Morgan Chase & Co reaped windfalls from higher interest payments, focus will be on smaller banks that were at the center of last month's banking turmoil and forecasts from companies amid recession worries.

Other major U.S. banks including Goldman Sachs Group Inc , Bank of America Corp and Morgan Stanley will report through the week. "Regional bank earnings will come in very slightly positive, while bigger banks will probably post surprisingly positive results," said Sam Stovall, chief investment strategist at CFRA Research.

Analysts expect profits at S&P 500 companies to have declined 4.8% in the first quarter of 2023 from the year-earlier period, according to Refinitiv data, a slight improvement from last week's forecast of a 5.2% decline. "Inflation fire has really been put out, but we're going to continue to pour water over it until we feel confident that it is so," Stovall said, adding that people were bracing for a deep recession that just might not come.

The U.S. central bank is widely seen raising rates by 25 basis points to the 5.00%-5.25% range next month, but recent economic data signaling a slowing U.S. economy have intensified debate over whether it will be the last in this cycle. Traders' bets of a 25-bps hike in May have risen to 85% from 78% last week, according to CME Group's Fedwatch tool.

U.S. Treasury yields touched session highs after data showed business conditions in New York state unexpectedly bounced back to expansion territory in April after slumping in the previous month. At 9:35 a.m. ET, the Dow Jones Industrial Average was up 20.85 points, or 0.06%, at 33,907.32, the S&P 500 was up 1.73 points, or 0.04%, at 4,139.37, and the Nasdaq Composite was up 12.12 points, or 0.10%, at 12,135.58.

Alphabet Inc dropped 2.9%, dragging the communication services sector index down by nearly 2%, following a report that Samsung was considering replacing Google with Microsoft Corp's Bing as the default search engine on its devices. Microsoft's shares rose 1.6%, boosting the S&P 500 Information Technology index.

Prometheus Biosciences Inc rallied 69.5% on Merck & Co's plans to buy the biotech company for about $10.8 billion. HP Inc gained 4% after the J.P.Morgan upgraded the stock to "overweight".

State Street Corp fell 15.5% after the custodian bank reported a weaker-than-expected quarterly profit. Advancing issues outnumbered decliners for a 1.24-to-1 ratio on the NYSE and a 1.24-to-1 ratio on the Nasdaq.

The S&P index recorded nine new 52-week highs and one new low, while the Nasdaq recorded 29 new highs and 55 new lows.